The proportion of American millennials sharing their home has hit its highest level in 115 years.
A recent study published in a blog by Trulia shows that 60 percent of young Americans live with parents, other relatives, friends or roommates as high rents and high home prices make solo living unaffordable.
Trulia’s Mark Uh, writes that in Miami a typical renter would need to spend almost half of their income on renting a one-bedroom apartment but for a millennial this rises higher, to 54 percent.
Millennial renters also pay more than typical renters in Boston and Los Angeles but less in San Francisco and New York.
The article highlights the savings that are achievable by renting a two-bedroom home with a roommate rather than living alone in a one-bedroom home.
Double-digit savings can be achieved in eleven of the top 25 rental markets but Miami is a unique case. Despite the saving being the largest among the top rental markets, the 19.2 percent saving from renting with a roomie would still leave the rent unaffordable by US government metrics.
Of course, with many low down payment options available and mortgage rates still near historic lows, this may be a market segment that needs to be educated on the value of purchasing instead of renting.
What Happened to Rates Last Week?
Mortgage backed securities (FNMA 3.50 MBS) gained +53 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move lower from the prior week.
We had a holiday-shortened week (President’s day the bond market was closed) and a very light week for economic data. The stock market continued to rally and so did long term bonds at the same time. We had another round of Federal Reserve members making very hawkish statements in an attempt to get the market to price in the potential for a March rate hike, but it simply didn’t work. MBS received the most momentum due to a spike in uncertainty over the future of the Eurozone.
Across the Pond: Euro systematic risk (France, Italy, Spain and to a lesser extent Germany) have caused German bund yields to contract (lower rates) as investors seek a safe haven as risk over elections weigh on their positions as polling data show strong support in those countries for candidates that support some sort of Eurozone reform.
The Talking Fed:
Dallas Fed President Robert Kaplan (voting member) said that the Fed needs to “normalize” rates “sooner rather than later”. This is nothing new for him as he was very hawkish for most of 2016 but he wasn’t a voting member then.
Fed Board member Jerome Powell (voting member) was asked whether a rate hike is “on the table” for a March 14-15 policy meeting, Powell told reporters: “Yes,” adding: “It will be appropriate to gradually raise interest rates, including fairly soon,” if the economy carries on roughly as it is currently.
We got the Minutes from the last FOMC meeting on Wednesday you can read them here and as expected, they were a little “hawkish”. But there was really nothing too new from the original balance sheet. It was a mixed bag with most participants seeing a rate hike “fairly soon” if the economy keeps on track but warned that the expected boost (by the stock market) in the economy due to lower tax rates or new fiscal stimulus may never materialize as these programs are unknown and may not happen in the near term.
What to Watch Out For This Week:
The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.
It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.
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